CFPB Highlights Cost Burden of Electronic Payment Fees in K-12 Schools

In an Issue Spotlight report, the CFPB considered the costs associated with electronic payment processors that service lunch programs in K-12 schools.

In the report, the CFPB found the following:

• Shift to Cashless Operations. School districts are increasingly adopting cashless systems to enhance administrative efficiency and align with a broader trend towards digital payments. 87 percent of the largest school districts have contracts with payment processors for electronic payments, including school lunches.
• Fees for School Lunch Payments. Payment processors charge fees for adding money to student lunch accounts, costing families up to $100 million annually. Typical fees include $2.37 per transaction or 4.4 percent of the transaction amount. These fees also apply to other school-related expenses.
• Impact on Low-Income Families. Families eligible for reduced-price lunch programs can spend $0.60 in fees for every $1 on school lunches, potentially incurring $42 in fees yearly. For families paying full price, the fee is $0.08 per $1. Fee structures disproportionately affect lower-income families who make smaller, frequent payments.
• Limited Access to Fee-Free Options. Fee-free payment methods are often not prominently available or are more burdensome to use than electronic options, impacting low-income families.
• Dominance of Three Companies. The market for school lunch payment services is dominated by three companies—MySchoolBucks, SchoolCafé and LINQ Connect—which serve 67 percent of students in the sample.
• Lack of Competition and Consumer Choice. Complex contracts and company structures limit competition and the ability of school districts to negotiate fees. Families cannot choose their payment platform, as school districts determine contracts, making it difficult to avoid potentially harmful practices.